Central Federal Corp, Worthington, OH (CFBK)

A Case of Book-ish and 10x

This is a fun time to be a bank stock investor! So many really nice banks are trading at compelling values that it’s hard to choose which one to feature first.

For example, I'm seeing a number of well-run banks where you can buy shares at book value, 10x earnings, or both, and reasonably anticipate doubling your money in three or four years.

CFBank is just one of these. CFBK is trading cheaply at 7.8x rapidly-growing earnings. In three years, earnings could be $2.50, book value could be $16, and CFBK could trade at $24.

It's smart to hold a few low-stress stocks like this that just compound earnings and don't require babysitting, no?

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Disclosure: As of this posting, I own shares of CFBK and may subsequently either dispose of them or purchase more.

Prospective Buyers	CFBank's leading market share in four towns would be especially attractive for these acquisitive neighbors. Farmers National Banc Corp, Canfield, OH (FMNB) LCNB Corp, Lebanon, OH (LCNB) Peoples Bancorp, Marietta, OH (PEBO)
Financial Snapshot †as of 06/30/2019	Total assets: $721M† Tangible book value per share:    $11.39† NPAs to assets: 0.75%† Price to book: 1.07% Market cap: $54.7M Dividend yield: 0% Trailing 12-month ROA: 1.0%† Trailing 12-month ROE: 13.9%†
The Crew	Robert E. Hoeweler, Chairman Timothy T. O'Dell, President and CEO Edward W. Cochran, Director, largest shareholder
The Skinny	These four characteristics inform my assessment that Central Federal Corp is well run and in a good position to grow: 1. Location, location! CFBank's branches are located in Ohio's top four metropolitan areas: Akron, Cincinnati, Cleveland, and Columbus. 2. Sizable branches. Between them, CFBank's Fairlawn and Worthington branches hold over $500 million in deposits. On average, deposits in the bank's other four branches exceed $37 million. (It takes about $15 million in deposits for a bank branch to break even.) 3. Effective CEO. Before Tim O'Dell arrived on the scene, CFBank was a sh*tty little thrift. O'Dell attracted good lenders, reduced problem loans, and exponentially increased both the size and profitability of the bank. 4. Invested Board. Collectively, the Central Federal Corp board owns 19% of CFBK stock, and every director is invested (which isn't always the case).
Sources	CFBank website Q2 2019 Quarterly Report 2018 Annual Report S&P Global Market Intelligence

LETTER: Pacific Enterprise Bancorp, Irvine, CA (PEBN)

There's no review of Pacific Enterprise Bancorp in Timyan Bank Alert.

But since other investors seemed to appreciate my sharing last month's letter to Peoples Financial Corp, I figured I could let you "in" on this aspect of my work more often.

Pacific Enterprise is a good bank that can sell for 50% higher than its last trade price, and I hope it does!

Below is a letter I am sending to the Chairman of Pacific Enterprise Bancorp.

See also
Pacific Enterprise Bank website
Q2 2019 Quarterly Report

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Disclosure: As of this posting, I own shares of PEBN and may subsequently either dispose of them or purchase more.

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My Letter to Pacific Enterprise Bancorp

Dennis H. Guida Jr. Chairman
Pacific Enterprise Bancorp
17748 Sky Park Circle
Suite 100
Irvine, CA 92614

Dear Mr. Guida,

I own 2% of Pacific Enterprise Bancorp. Thank you for your fine stewardship of the bank. Thanks to your team, too, for their fine execution of the business plan. Since its founding in 2007, Pacific Enterprise has had a fine run.

I was happy to hear you tried to sell the bank last year, but found your unrealistic expectations for what you'd get in a sale disappointing. Your board should know that you have shareholders, including me, who would prefer you sell Pacific Enterprise to the highest bidder, instead of holding out for a magical number.

Please share this letter with the board.

Respectfully,

Philip J. Timyan
PEBN Shareholder

LETTER: To Peoples Financial Corp, Biloxi, MS (PFBX)

Time step up the heat on Swetman.

It's not just the July weather that has me hot and bothered. Since my February 28, 2019 update on Peoples Financial Corp, new information has come to light revealing a serious lapse at the Board level and an urgent need to clean house at The People’s Bank.

Hence, I have decided to take a more proactive approach on behalf of all shareholders invested in PFBX.

Below is a letter I am sending to the Independent Directors of The People's Bank. If you are a shareholder who agrees with my assessment, I encourage you to send your own letter, too.

Letters may be emailed to gbatia@thepeoples.com

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Disclosure: As of this posting, I own shares of PFBX and may subsequently either dispose of them or purchase more.

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My Letter to Peoples Financial Corp

To the “Independent” Directors of Peoples Financial Corp

• T. Dan Magruder, Vice Chairman
• E. A. "Drew" Allen
• Rex E. Kelly
• Jeffrey H. O'Keefe Sr.
• George J. Sliman III

Howard and Lameuse Avenues
Biloxi, MS 39533


Dear Directors,

I am a long-term shareholder in Peoples Financial. I own more shares than any director not named Swetman.

It has been painful to witness the abysmal performance of the bank.

You owe shareholders the fiduciary duty to explore a merger. Your results will not justify a stock price anywhere near what you could obtain in a sale in any of our lifetimes. If you want Peoples to remain independent, you should pass the hat in the community, pay the outside shareholders a fair price, and go private.

Given recent prices paid for your neighbors, Charter Bank and First Florida Bank, and in spite of your lousy 0.06% ROA and 0.4% ROE, I believe you could garner as much as $30 per share in a sale, due to the cost savings an acquirer could achieve.

The recent SunHerald article highlighting loans The Peoples Bank made to crooked lawyers demonstrates the Board’s complete lack of control and failure to oversee inept management. And this is only what the reporter was able to find out. What other improper loans are there that we don’t know about? Further, what malfeasance did you commit to incur the June settlement payout of $200,000?

Since April 3, 1996 (the first date for which I can find a trade in PFBX stock), the value of PFBX — including dividends reinvested — has DECLINED by 8%. In contrast, the S&P has advanced by almost 600%. All on your and Chevis Swetman’s watch. In my opinion, the Board should fire Swetman for cause. What other publicly held bank CEO has made nefarious loans like this, spent 40 years destroying shareholder value, and still has a job? As “Independent" Directors, you are personally liable for your failure to properly govern Peoples Financial.

In conclusion, you have not earned the right to maintain control of this bank, and you are not abiding by your own corporate Code of Conduct. Please exercise your fiduciary duties to shareholders and sell The Peoples Bank to the highest bidder before any more value is dissipated.

Respectfully,

Philip J. Timyan
PFBX Shareholder